Huobi, a digital currency exchange platform based in Singapore, is testing a new trading option for investors and speculators who may be concerned about putting too much "skin the game." Even though the mood was guarded at the Cryptofrontiers gathering in New York City, Huobi decided that this was a good time to announce beta testing of its new derivatives trading platform. Derivatives are contracts that reduce the exposure that investors may face in a financial market; they are very popular in the world of commodities where investors may not want to take actual delivery of metric tons of coffee beans or barrels of crude oil. In the case of cryptocurrencies, investors may take long or short positions that are essentially bets on whether exchange prices may rise or fall. When trading futures contracts on digital currencies such as Bitcoin, investors secure the right to purchase or sell at prices that they speculate in the future. Derivatives can be traded similar to bonds in the sense that investors do not have to hold on to them; however, these contracts have expiration dates that may render them worthless if traders decide to not execute upon them. The trading of futures contracts is not exactly new for cryptocurrencies. At the Chicago Mercantile and Board Options exchanges, for example, investors can speculate on Bitcoin without actually having to set up digital currency wallets. With Huobi, investors can actually set up wallet accounts should they desire to take delivery of the digital tokens they speculate on. An interesting aspect of Huobi is that more than three of its executives are part of the Communist Party of China, which means that the company is now a political committee that can extend its operations to the Chinese government for the purpose of tapping into sovereign investment funds. These committees may also act as a conduit for investors who wish to do business with China within certain sectors. During Huobi's beta testing period of its derivatives market, investors based in certain jurisdictions such as the United States, Israel and even Singapore will not be allowed to participate.
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